The paleoeconomist Paul Krugman eloquently demonstrates this point in his New York Times column today…

Labeling immigration part of a “hard right economic conservative” agenda, Dr. Krugman notes

Countries with high immigration tend, other things equal, to have less generous welfare states than those with low immigration. U.S. cities with ethnically diverse populations — often the result of immigration — tend to have worse public services than those with more homogeneous populations

This is true. I’ve seen this first hand. As I wrote more than a year ago:

[My home state, South Dakota, was] settled by two big government groups: Germans and Swedes. Swede-state Minnesota is famous for its “red’ tradition, while the state of Bismarck, North Dakota is partially socialist. Fortunately, while Germans and Swedes are very charitable to their own they are suspicious of each other, and so ethnic distrust led to South Dakota’s very small government.

Diversity leads to small government. Think of the huge “protected” sector in Japan, or the traditionally insular European states, and the huge welfare systems they have built. People are generous with other people’s money to people like them, and will spend away the future in big-government solutions to problems. But in an immigration nation built with people from all over, and the public is more respectful of property and skeptical of Official Establishments.

My February 2005 post was inspired by an Economist article from that time, which found the same thing happening throughout Europe. Not only were the least diverse European societies the most pro-big-government (Sweden, Finland, etc), but public happiness with that policy fell as immigration levels increased.

People are naturally inclined to help those more like themselves, and less likely to help the more different. This is what Krugman is noticing.

The united States are a sample size fifty, and we see the same pattern (made most famous by the Minnesotan Swedish Socialist Republic's republican revolution the wave of diversity) as with the EU (sample size twenty-five).

Is the relationship between diversity and government size a matter of generosity or agreement? Think of government as a means for people to cooperate on projects of benefit. A homogeneous people can have a great deal of agreement on what needs to be done and set up their government to get it done. A diverse people, however, will probably have a harder time deciding what needs to be done, so relatively few projects will have enough support to be started by the government.